Taipei: Apple Inc expects shipments of high-end iPhone 14 models to be lower than expected following a production cut at a virus-infected factory in China, clouding its sales outlook for the holiday season.
Strong demand for new iPhones has helped Apple become a rare bright spot in the global tech sector that has been hit by spending cuts due to inflation and skyrocketing interest rates.
But the Cupertino, California-based company has now fallen victim to China’s rigorous zero-COVID-19 policy, which has already prompted many global companies, including Ester Lauder Companies Inc and Canada Goose Holdings Inc. , to close their retail stores in China and cut forecasts throughout the year.
“The facility is operating lately at a particularly reduced capacity,” Apple said Sunday without specifying the impact on production.
“We continue to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect shipments of iPhone 14 Pro and iPhone 14 Pro Max to decline from what we had anticipated in the past,” he said. .
Reuters reported last month that Apple’s iPhone production could fall 30% at one of the world’s largest factories in November due to tightening COVID-19 restrictions in China.
Its main factory in Zhengzhou, central China, which employs about 200,000 people, has been rocked by discontent with strict measures to curb the spread of COVID-19, with many fleeing.
Market research company TrendForce said last week it had cut its forecast for iPhone shipments for the December quarter from 2 million to 3 million units, down from 80 million previously, due to unrest at the Zhengzhou plant, adding that its investigation into the disclosure. that factory capacity utilization rates were now around 70 percent.
Apple, which introduced sales of the new iPhones in September, said consumers would revel in longer wait times to get their new products.
The world’s most valuable company with a market capitalization of $2. 2 trillion forecast in October that earnings expansion would fall below 8% in the December quarter.
“Anything that affects Apple’s production affects the price of its inventory,” said Quincy Krosby, lead global strategist at LPL Financial in Charlotte, North Carolina.
“But this is part of a much deeper story: the uncertainty surrounding the long-term Chinese economy . . . These headlines are part of the ongoing saga about whether there is any fact in the constant rumors that the government is discussing whether some of the measures will be lifted in the first quarter.
China on Sunday reported its six-month number of new COVID-19 infections, a day after fitness officials said they were sticking to strict coronavirus restrictions, likely disappointing investors’ recent hopes for a relaxation.
Taiwan’s Foxconn, the operator of the Zhengzhou plant, said on Monday it was racing to resume full production at the plant as soon as possible and downgraded its outlook for the fourth quarter.
He said he would put new measures in place at the plant to curb the spread of COVID-19, adding a formula that would restrict workers’ movement between their dormitory and the factory area.
Foxconn shares fell 0. 5% in early trading on Monday, 1. 2% on the broader index.
On Wednesday, China ordered a commercial park housing the iPhone factory to enter a seven-day lockdown, in a bid to ratchet up pressure on Apple as it struggles to quell grassroots worker discontent.
The economic zone of central China’s Zhengzhou airport said it would impose “quiet management” measures with immediate effect, adding a ban on all citizens leaving and the approved car registration permit on the area’s roads.
Foxconn, the world’s largest contract electronics maker, said the provincial government of Henan, where Zhengzhou is located, “has made it clear that, as always, it will fully support Foxconn in Henan. “
“Foxconn is now working with the government in a concerted effort to eliminate the pandemic and resume production at full capacity as temporarily as possible. “
Foxconn, formerly Hon Hai Precision Industry Co Ltd, is Apple’s largest iPhone manufacturer and accounts for 70% of iPhone shipments worldwide. It has smaller production sites in India and southern China.
After showing “cautious optimism” in the fourth quarter, Foxconn would “revise downwards” its outlook given the occasions in Zhengzhou.
The fourth quarter is the peak season for Taiwanese tech corporations as they rush to acquire cell phones, tablets and other electronic devices for the holiday season in Western markets.
Foxconn releases its third-quarter effects on Nov. 10. -Reuters
(Reporting through Ben Blanchard in Taipei, Caroline Valetkevitch in New York and Jaiveer Shekhawat in Bangalore; Written through Miyoung Kim; Editing by Daniel Wallis and Christopher Cushing)
Disclaimer: This report is generated from the Reuters news service. ThePrint declines all responsibility for its content.
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